The Moneyist: While visiting my dying stepmother, I discovered her children had looted my father’s estate

My father passed in 2001. He married his wife in 1971 when I was 14. I have two blood siblings, and my step-mother had one daughter; they are very close. My stepmother is now 91 and in failing health. My wife and I traveled 1,000 miles to stay with her during her recovery from pneumonia, and chronic obstructive pulmonary disease last week. We have always gotten along well together and, over the years, my siblings have been very nice to her.

‘I realized I was looking at the looting of my dad’s estate—and all the money had been drained by my step-sister and her husband.’

Before my dad passed, we had a frank and clear discussion about his estate. He had worked and invested and had more than $1 million in his estate, which he clearly stated to me was to be split four equal ways upon the death of his wife. She was also provided for by his company’s life insurance policy, and the $600,000 from the sale of his Southern California home.

During our visit, she offered to have us stay in her home. I was going through the old picture albums, and taking some cell phone camera shots of my kids. There weren’t a lot, mostly of her daughter.

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One of the picture albums had financial documents in it, and I soon realized I was looking at the looting of my dad’s estate—and all the money had been drained by my step-sister and her husband.

I’d like to say I was shocked, but really it was almost a validation. My stepsister’s husband has been on disability for 18 years. Each year, their whole family of 6 takes at least 2 cruises. They drive new cars, and there was plenty of money for my stepsister to buy a business for her son.

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I didn’t see the will when my dad died, but somehow he left it so that in certain circumstance, if his wife’s income fell to a certain level, they were able to access my dad’s estate principle. In 2009, my stepsister and her husband took out a $750,000 single-premium life insurance on my stepmom.

They borrowed $617,000 from my father’s life insurance policy, and the surrender value and death benefit are now about $120,000. They also wrote my stepmom’s trust and so that my stepsister gets 75% of any distribution, and the other three kids share equally of the remaining 25%.

My stepsiblings wrote my stepmom’s trust and so that my stepsister gets 75% of any distribution and the other three kids share the remaining 25%.

My stepmom brought very little in assets into the marriage—just a small home in California, which wasn’t worth much. She had no other major assets. The life insurance policy was paid in full at the time of issue, and the money had to come from my father’s estate. Even if we fight it now, the money has been gone for 9 years, and now that stepmom is in poor health we can see that, from our expected $250,000 distribution from dad’s estate, the blood issue kids will be very lucky to get even $5,000 after probate and taxes.

I am lucky that I’ve worked hard and invested well that it won’t be a problem for my wife and I. My brother is on a pension from the state of California and is OK, but my sister and husband are going to be hit hard by this. She has been counting on that estate for 20 years to fund her own retirement, and it’s not going to be there.

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A word of warning to your readers: Don’t trust anyone. I’m going to get a lawyer, and fight it for the hell of it, but even after I win a judgment, the money has been spent, and we’ll never get anything out of it. Any other suggestions?

Distraught

Dear Distraught,

These stepsiblings are absolutely attempting to cheat you out of your inheritance.

If your father did not leave a will, the probate court should have divided the estate in accordance with the law in the state of California. If you father died intestate (without a will) in California, community property goes to the surviving spouse, receives one-third of the total separate property if there’s more than one child with the rest divided among the children. Gather any documents you can on your stepfamily’s financial transactions as evidence, obtained legally. But it may be too late.

There is a statute of limitations on an oral promise in California. “The applicable statute of limitations for filing a lawsuit to enforce an oral promise to make a will or trust is one year from the date of death of the person,” according to Sweeney Probate Law, which has offices across the state. Anyone contesting a will has 120 days after it has been admitted to probate.

You may have better luck with the statute of limitations in relation to fraud. You must file a lawsuit within three years of discovering the fraud or three years “within reasonable diligence” where you could have discovered those facts. The latter sounds like a more moveable date that is open to challenge. Your lawyer will best advice you on your options.

Your stepmother may or may not have been an accomplice to these transactions. What is clear: Your stepsiblings saw an opportunity to transfer this wealth.

Your stepmother may or may not have been an accomplice to these transactions. What is clear: Your stepsiblings saw an opportunity to transfer this wealth. Obtain a copy of all life insurance policies, compile a timeline of events. You may have a case for breach of contract of the life insurance policy and/or elder abuse (if your stepsiblings carried out these shenanigans while your stepmother was mentally impaired) and even fraudulent wire transfer.

If you have an experienced probate attorney, he/she may have another solution relating to fraud. But you may be out of luck. You were correct not to rely on your stepmother and her family to honor your father’s wishes, but the statute of limitations and trying to find money after it’s been drained from multiple accounts present dual challenges for you. If nothing else, it serves as a timely warning to leave nothing to chance.

Do you have questions about inheritance, tipping, weddings, family feuds, friends or any tricky issues relating to manners and money? Send them to MarketWatch’s Moneyist and please include the state where you live (no full names will be used).

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